By the end of 2026, British American Tobacco South Africa (BATSA) will close its only manufacturing plant – all but ending cigarette production in South Africa.
The Heidelberg facility in Gauteng is being forced to close after the illicit cigarette trade in South Africa has taken an estimated 75% share of the local market.
BATSA says it can no longer compete with this shadow economy, which has made local manufacturing unsustainable.
The company has stressed that it is not exiting South Africa entirely. Instead, it will shift to an import-based model to continue supplying adult consumers.
“With approximately 75% of the South African cigarette market now estimated to be illicit, continued
local manufacturing has become unviable,” said Johnny Moloto, Head of Corporate & Regulatory
Affairs at BAT Sub-Saharan Africa.
Hundreds of jobs on the line
The Heidelberg plant is currently operating at just 35% of capacity. BATSA attributes the sharp decline to the rapid growth of illegal tobacco sales.
An Ipsos study commissioned by BAT found nearly 80% of retailers in South Africa are selling illicit cigarettes, often priced below R20 a pack and under the R26.22 minimum collectible tax.
The closure places about 230 jobs at risk in the Lesedi Municipality. BATSA said the decision has been a painful blow for employees and their families.
“These are skilled people who have given years of service,” Moloto added. “They are paying the price for an illicit market operating outside the law.”
Devastating tobacco ban during Covid
BATSA said it has engaged SA government and law enforcement for more than a decade, and repeatedly warned about weak enforcement and policy decisions that fuel the illegal cigarette trade.
The company has also pointed to “the unconstitutional 2020 Tobacco Sales Ban” during Covid, from which the legitimate market has never recovered.
BATSA has experienced a 40% volume decline since 2020 due to the subsequent explosion of availability of illicit cigarettes in the market.
Above-inflation excise increases have also widened the price gap between legal and illegal products, BATSA said.
BATSA has further raised concerns about proposed tobacco legislation before Parliament. SARS has previously warned lawmakers that this bill could worsen illicit trade.
The Heidelberg plant has operated since 1975. BATSA said it had tried efficiency measures to keep it open.
“But when three-quarters of your market is illicit, there’s a limit to what any company can do. We’ve reached that limit,” BATSA concluded.
